On Brian Rogers’ desk at T. Rowe Price is an engraved cube displaying the reminder, “Doubt everything. Believe nothing.”
“And I think those are good things for investors to do,” as well, Rogers said at T. Rowe’s annual Global Market Outlook press briefing in New York in mid-November.
Nearly four months away from stepping down from his current role as CIO at T. Rowe, Rogers is taking time to reflect on his career.
“One thing that really struck me" in 1982 when he joined T. Rowe, he recalled at the event, is how "passive was making increasing inroads into our business." In addition, he said, "fees were under cyclical pressure in 1982. Fast forward to 2016 and it feels like the same two trends are in place, and will continue.”
On November 1, T. Rowe Price announced that Rogers will retire as CIO on March 31, after nearly 35 years at the firm. While he will stay on as a non-executive chairman of the board, his role as CIO will be taken on by six senior investment executives.
At the New York event, Rogers shared six key investing lessons he's learned over his career.
1) Be an Optimist
“When I think back over the course of my career I think back to Warren Buffett’s description of the 20th century," in which Buffett suggested that ‘If you had $1,000 to invest in 1901 but you knew about everything that was going to happen in the 20th century, you never would have invested the money.’”
(Related: Buffett’s 6 Nuggets of Investing Advice)
However, despite two world wars, depressions, financial crises, oil embargos, global tension and the Cold War, it actually was a good century in which to invest. Rogers suspects this century will be similar to the last. “So be an optimist despite how bad things seem [and] despite how volatile markets may be,” Rogers said. “Being optimistic, I think, is something that really makes sense for the individual and the institutional investor.”
2) View Crises as Opportunities
“When you look back over history, a lot of the crises we’ve lived through now just look like little blips on a price chart,” Rogers said.
“If you think back to the crash of ’87, the downturn in 1990-91, even the Dot Com crash...when you look at a long-term price chart, they look like little blips. So you have to view those things as opportunities. Everything is cyclical.”
3) Price Determines Success
“Think of your own lives: If you pay too much for a house, it may not be a good investment for you. If you pay too much for a stock or bond, it may not be a good investment for you,” Rogers said. “Ultimately price and value converge, but it can happen from different directions. You can have price and value, and price drops. Or you can have value and price, and price rises.
"Not surprisingly, it’s tougher to make money when prices are high.”
4) Be Humble
“One of the things I think I’m known for within our organization is--very gently--from time to time telling people that they don’t know as much as they think they know,” Rogers said. “Over-confidence as an investor is a great challenge.”
To support his point, Rogers quoted Confucius: Real knowledge is to know the extent of one’s ignorance.
“One of the things we preach within the investment organization is ‘Know what you know. Know what you don’t know. And don’t be overconfident about it all,’” he added.
“Simplicity is a virtue. I have seen so many investors get into so much trouble over the years with what I call ‘fancy products,’” Rogers said.
Today one of Rogers’ favorite investment products to “really go after” is leveraged ETFs.
“Does anyone really think that betting the 3x Brazil [will go] up is a good bet for the individual investor?” though he acknowledges “it would have been this year, but it’s a very difficult thing to do and I think the financial services industry from time to time should be criticized for offering products that are so complicated, so complex that investors can’t really understand the risk and return framework of them.”
6) Avoid Investment Cults
“I remember Bethany McLean, when she wrote the book The Smartest Guys in the Room [about the Enron scandal], she talked about steering clear of companies that are so popular, so much in the press – think Valeant, think Theranos, think companies like that. Over the years it’s been companies like Enron [and] Tyco.”
For example, Rogers pointed out that the leaders of the equity markets in ‘80s – like Digital Equipment Corporation, Data General and Intergraph – are barely remembered today.
“Beware the ‘It’ stock,” he said. “And beware of companies always on the front page. Beware of hot sectors and companies with very low barriers to entry into their businesses.”
--- Related on ThinkAdvisor: